If a house buyer has an offer accepted, and then another buyer comes along and makes a higher offer that the seller decides to accept instead, the first buyer has been gazumped. This is currently legal in the UK, but the Department for Business Innovation and Skills (BIS) is calling for evidence that will help it redraft property-buying legislation to speed up the process and make gazumping a thing of the past.
New legislation is expected to make property deals binding at an earlier stage of the process than they are at present, and move responsibility for the property survey onto the seller. Already, changes in law have made gazumping illegal in Scotland and many other countries in Europe; the UK may soon follow suit.
This is, obviously, good news for buyers, although it is likely to also bind them into the agreement earlier in the process, removing the option to pull out.
However, it could affect the property market: home owners may be less likely to sell, with sellers’ fees increasing to include the cost of the survey and other legal fees. This could in turn reduce the quantity of housing stock available for sale.
Our sales consultants from Henry Wiltshire’s Canary Wharf office say, “The estate agent is obliged to pass on all offers, unfortunately this can happen when an offer has already been accepted. It is also not unheard of for the seller to claim at the last minute that there is a higher offer, whether there is one or not, just to see if he can squeeze a little extra out of the buyer.”
With a bit of forward planning, there are a number of ways to reduce the chance that it will happen to you. Here are the best ways to avoid being gazumped.
1. Act fast
The more quickly you can exchange contracts, the less chance you have of being gazumped. You can save time by putting in place a “mortgage in principle,” a conditional mortgage offer from a lender in advance of the sale. It’s also a good idea to have your conveyancing solicitor standing by, and to have chosen a surveyor and checked their availability, so you don’t lose any time.
2. Take the property off the market
As part of your offer, include a request that the property be taken off the market. If it’s not there, no one else can make an offer and you’ll minimise the risk of being gazumped.
Gazumping insurance has been created to cover you against the financial losses of putting in an offer and having it gazumped. It’s also called purchase protection and is available from specialist insurers.
4. Get it in writing
Lock out agreements can be put in place to ensure that your offer is the only one accepted by the buyer and that the sale goes ahead. Usually both buyer and seller pay a deposit which is then forfeit to the other party if one side pulls out. These agreements are also called lock in agreements and exclusivity agreements, and it’s worth asking if they’re a service offered by your conveyancing solicitor.
There are many ways of protecting yourself against gazumping. Maybe future legislation will provide even more.